Real Property Appraisals: A Primer

Their home's purchase is the most serious financial decision some people will ever make. It doesn't matter if a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

Most of the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Next, the bank provides the money necessary to bankroll the transaction. And ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the value of the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Kerrie Middeldorp Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Kerrie Middeldorp Appraisals is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we pull information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Kerrie Middeldorp Appraisals, we are an authority when it comes to knowing the value of particular items in Bend and Deschutes County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property yields is factored in with income produced by neighboring properties to derive the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Kerrie Middeldorp Appraisals will help you get the most fair and balanced property value, so you can make wise real estate decisions.